Quantifying the Sectoral and Distributional Effects of Demographic Change in Germany

Abstract

The accelerating pace of the demographic transition in Germany will prove to be one of the key factors in the development of society in the coming decades. This process is driven by falling mortality rates and a decline in birth rates, which reduces population growth rates and increases the share of older people in the economy. Figure 4.1, based on demographic projections by the Federal Statistical Office of Germany, illustrates the impact of population aging on the population growth rate, defined here as the growth rate of the adult population, and the ratio of the workingage population (aged 20-64) to total population (20-94) for the period 2003-2050. Population growth rates are predicted to decline and will even turn negative in 2014. As a consequence, the population starts shrinking in around 2017 (not shown). The working-age population ratio, as a crucial indicator of aging, is projected to decrease sharply by 13.8% from 0.74 in 2003 to 0.62 in 2050.